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Arizona’s Terrible Hockey Team Wants a Third Taxpayer Funded Stadium Since 1996

Saturday, April 8, 2017 7:33
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The Arizona Coyotes are a professional hockey team that no one really wants, but taxpayers in Arizona might be forced to subsidize a third new stadium in less than 20 years as the National Hockey League chases the mirage of economic success in the southwest.

A bill that would have committed $225 million in public funds—part coming from state coffers and part from the city of Tempe—does not appear to have enough votes to pass the state legislature, but lawmakers could still resurrect the stadium deal as part of the budget plan. The Arizona Republic reported this week that Senate President Steve Yarbrough (R-Chandler) says it’s “unlikely” the legislature would approve the stadium in the budget bill, but, frankly, that’s not good enough, because the whole idea should be rejected out of hand. There is no good argument for building the Coyotes another new stadium after they’ve failed to attract much interest from fans in Phoenix or Glendale, where they’ve played since 2003.

Despite two decades of disappointments on the ice and at the turnstiles, the NHL is lobbying hard for a new stadium for the Coyotes, promising that this time things will be different.

The new stadium “will create a true win-win for the team, the state, and the community,” wrote NHL commissioner Gary Bettman in a letter to state lawmakers. “A victory that will generate new tax revenue capable of funding Arizona priorities like education and public safety.”

To believe him, you’d have to disregard the Coyotes’ entire history in the Phoenix area, as well as the economic reality of building sports stadiums with public cash.

Since the team is already in the area, building a new stadium would not create a new source of tax revenue for Arizona, says Victor Matheson, a sports economist at the College of the Holy Cross. Moving from Glendale to Tempe, Matheson says, merely would shift the economic benefits from one municipality to another. And that’s only true if you buy the argument that subsidizing stadiums is a net economic gain, which it’s generally not.

“Independent economic research has typically not found that new hockey areas generate sufficient tax revenue to cover the cost of construction,” Matheson told Reason this week. “Of course, even if it did, the question be why is it fair for an NHL team to direct its tax obligations towards its own facility while other businesses have to pay taxes that go to statewide governmental needs.”

The Coyotes relocated to Phoenix from Winnipeg, Manitoba, in 1996 and took up residence in the America West Arena (now known as the Talking Stick Resort Arena), which the city of Phoenix built in 1990, at a cost of $90 million, for its professional basketball team, the Phoenix Suns. Even after undergoing extensive, and expensive, renovations to fit a hockey rink into it—unlike most basketball-sized arenas in the country, the America West Arena had not been designed with hockey in mind, probably because no one thought there would ever be a hockey team in Phoenix—the arena soon was determined to be “sub-optimal” for a professional hockey team.

By 2002, the Coyotes and National Hockey League convinced the nearby city of Glendale, Arizona, to put up $155 million in bonds to build a new arena for the hockey team. The Coyotes moved into Glendale’s Gila River Arena in December 2003.

After the Coyotes’ previous owner put the team into bankruptcy in 2009, Glendale ended up paying the NHL $50 million over two years to keep the team from relocating. During that same period, the city had to lay off city workers, cut services, and raise taxes to close annual budget gaps. A new owner signed a 15-year lease with the city in 2013, but the city council voided that agreement in 2015 after determining that it was a bad deal for taxpayers, leaving the team without a long-term home.

Voiding that deal was the right move. An analysis by the Arizona Republic found Glendale would lose an estimated $9 million annually on the 2013 stadium deal, even under the sunniest of circumstances, which included booking the arena for dozens of major concerts each year and having the Coyotes advance to the Stanley Cup Finals (the NHL equivalent of the World Series) every year for the next 20 consecutive seasons, thus ensuring the maximum number of home games possible.

That seems very unlikely. Since relocating to Phoenix from Winnipeg 20 years ago, the franchise has collected exactly one division title and has won only two playoff series (both in the same season). They will miss the playoffs again this year—the fifth consecutive year they have missed the playoffs, despite the NHL’s generous postseason format that allows 16 of the 30 teams to participate.

The team’s terrible on-ice performance is worth noting—not to suggest that a more successful team would be more deserving of a public handout—as context for the Coyotes’ attendance figures, which are similarly pathetic. Out of 30 teams in the NHL, Arizona has not ranked higher than 28th in attendance since 2007 and has finished dead last three times since 2010. With the final home game of the season scheduled for Saturday night, Arizona has averaged fewer than 13,000 fans per game, placing them second-to-last in the league.

After more than two decades, it seems fair to conclude that residents of the greater Phoenix area just don’t care very much about ice hockey.

“You can raise all sorts of questions about whether hockey would have worked at all in Arizona, but even if it did, that’s only 41 night per year,” Matheson says, adding that you need more than a single professional team to make a stadium profitable. Building more stadiums in a single metropolitan area will only create more competition for a limited number of major events.

“Lady Gaga isn’t going to play both Phoenix and Glendale,” is how Matheson puts it.

The Coyotes are unlikely to leave for greener pastures, though, because NHL executives care much more about having a team in the Phoenix area than anyone in the Phoenix area cares about having a hockey team. The Phoenix metropolitan area is the sixth largest media market in the United States, which means an NHL benefits from having a presence there—even if the team is terrible and the fans are apathetic—for marketing purposes and television advertising revenue.

If having a team in Phoenix means so much the NHL, you might be thinking, then maybe the league would help pay for the cost of the team’s third stadium in 20 years? Close, but not quite. What the league has done is push the state legislature and governor to get the public to pay for a new stadium. Again.

That brings us back to Bettman’s March 7 letter urging the state legislature to fund a new stadium for the team.

“The Greater Phoenix region represents a strong hockey market,” Bettman wrote, despite all evidence to the contrary.

The rest of the letter has a similarly loose relationship with truth. Bettman argued that the Coyotes “must have a new arena location to succeed,” and repeated the same sort of promises of economic growth (3,600 jobs! $600 million in “economic impact!”) that are always claimed by supporters of public subsidies for sports stadiums and very rarely, if ever, come to pass. The new facility would be “in a more advantageous location—nearer to the team’s established fan base,” and would “guarantee the continued growth of hockey in Arizona,” Bettman claimed.

With all due respect to Bettman, there’s nothing about Phoenix that suggests it is—or ever will be—a “strong hockey market.”

If the Coyotes were to move, taxpayers in Glendale would continue footing the bill for an empty stadium, while taxpayers in Tempe would end up footing the bill for a mostly empty one.


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